Angel investor. Probably the coolest title in the investing world. This moniker belongs to high net worth individuals who financially back a business, usually in return for equity in the company. With the cool name comes a pretty high level of risk. That’s why there have been laws allowing only individuals with large disposable income or net worth to play the game. These individuals can diversify their portfolio with potentially high-risk/high-reward investments.
That’s only one facet of why angel investors might back a startup or small business. It’s important to note that each angel investor is different. These are individuals, not venture capital firms. While Angels are putting out their own money, VCs typically invest with a client’s money. Angel investors have their own unique personality, interests, beliefs, and values.
Once you recognize that, it’s important to think of accruing angel inventors in terms of a target market: you need to identify the type of individual who shares your vision and wants to be part of it. Once you do that, go after them. We’ll get to how in just a minute. First, what do angel investors look for in small businesses?
Here are a few common themes:
- You have a rock-solid business plan, complete with financial projections, a marketing strategy, mission, etc. If you’re a business owner and you’re not sure where to start, Chris Guillebeau has a very simple one-page business plan. While this is perhaps oversimplified, it’s a good starting point and you can expand on it, or use it as a storyboard. The point is to have something to present to angel investors. Build out a pitch deck and include information that might be valuable to investors.
- You have genuine confidence and belief in yourself and your team. Investors are looking for a reason to say no. Kevin Rose, a successful entrepreneur and angel investor once said, “The key to making money in angel investing is saying no. You meet with 100 companies and say no to 99 of them.” If they don’t get the right vibe from you or sense a weakness, that’s all the reason in the world to walk away. Consider taking public speaking classes, learning the art of small talk, and practicing networking (there’s a variety of ways to do so). Developing those interpersonal skills will be invaluable to attracting interested angel investors.
- A business generating a buzz. Angel investors want to invest in companies that people are talking about. If you’re a shop owner or businessman, take the time to create and maintain social media accounts, seek PR opportunities, and plot how you can keep customers coming back.
If you’re checking the boxes on those bullet points, you’re setting yourself up for success with potentially attracting angel investors. As to where you might find them, there are many groups that facilitate interactions between startups and investors. Some reach nationwide like AngelList, while others, like Alabama Capital Network, focus on specific markets. Whether you apply through a website or run into an Angel at a coffee shop, the quicker you can get to a face-to-face (or face to zoom) pitch, the better. Nothing beats real conversation where both investors and business owners can get a feel for each other.
Thanks to crowdfunding, as a business owner, you’re opened up to a whole new set of potential Angel investors. Remember the part about this being for high net worth individuals? Well, the beauty of crowdfunding is that it’s for accredited and unaccredited investors; meaning, anybody can invest. And the common themes that angel investors look for are similar to what unaccredited investors might judge a business by. Just like your pitches to individual Angels, you can have authentic connections with all your investors through video pitches, live Q&A, and continual updates on your business.
Finding Angel investors through a crowdfunding platform may play out a little differently, but having access to an investor base and a Reg CF portal can mean aligned incentives and even more support in your corner. And because now anyone can play the Reg CF game, you can sign up accredited investors alongside the newly minted Reg CF Angels for a perfect mix of experienced advisors and a broader community buy-in.
Many angel investors will want equity ownership in your business (though some will do loans), so make sure you structure your business to receive investments. The beauty of Reg CF is that you get to decide what kind of offering you want to present to investors.
Business owners who meet the following criteria might be a good fit:
- Desire to finance growth or improve your existing capital structure
- Strong business fundamentals
- Excited for the connection, support and even accountability of local investors
- Seeking funds soon, but not an emergency (i.e. weeks or months, not hours or days)
- No immediate interest in selling
Vicinity Capital believes that investing should be easy but also value-oriented. That’s why we’ve set up our portal to allow interested angel investors to find companies they align with. If you’re a business owner and you’re wondering what raising capital with crowdfunding Angels looks like, email us at [email protected] and get ready to find those halos.